Understanding Deed of Trust and Mortgage
When owning a home it is important to be familiar with and understand the different terms and documents that are used in matters of real estate law. These documents vary from state to state and it is wise to do significant research into the real estate law of your state before buying a home.
The deed of trust involves three parties and makes the process of foreclosure quicker and easier and it is almost similar to mortgage. The only difference of real estate documentation is if the state uses a deed of trust or mortgage.
In case of a mortgage loan the homeowner will enter into a deal with the lender and throughout the mortgage period the deed of the home remains in the possession of the homeowner. According to the mortgage agreement if a homeowner defaults home loan repayments, the lender will have to take necessary steps in going through a long process of foreclosure.
Mortgages are taken out as a way to secure debt against the home or for other reasons that will depend upon the home owner and their unique situation. Mortgages are made between two people, the lender and the home owner
A deed of trust is different than a mortgage in that it requires three parties; the homeowner, lender, and the trustee. The trustee is responsible for holding the title until the initial agreement is fulfilled, either by the home owner completing all of the payments or the lender having to foreclose on the property. The process of foreclosure on a deed of trust home is an easier process than a home with a mortgage.
Homes purchased under deed of trust and upon homeowner’s default to make payments, a lender initiates the process of foreclosure and this procedure does not involve the courts. Such a speedy and low cost foreclosure enables the lender to recover any accrued losses as early as possible. On the other hand homes purchased under mortgage require judicial foreclosure through courts.
The differences between deed of trust and mortgage may appear to be negligible but whatever exists can be of great value to homeowners. Before buying a home see if your state uses mortgage or deed of trust. If you are not comfortable with a mortgage then do not buy a home in a state that does not use deed of trust and when you are uncomfortable with deed of trust then do not buy a home in a state that does not use mortgage. You have to find out which state uses mortgage or deeds of trust, as you don’t have a choice.
You can avoid having your home foreclosed provided you understand your legal rights and obligations when you chose deed of trust home ownership. Under mortgage home ownership when the lender takes you to the court you will have very little time to fight the judicial foreclosure proceedings.